XYZ Company contemplates the replacement of old machinery. The annual cost of operating the old machinery is P138,600, excluding depreciation, while the estimate for the new machinery is P91,300. The cost of the new machinery is P160,000, net of the trade-in allowance, with an estimated useful life of 8 years, no residual value. The effective income tax rate of 40% and the cost of capital is 8%. The old machinery has an annual deprecation of P15,000 while the new machinery is estimated to have an annual depreciation of P20,000. The book value of the old machinery is zero
required:
Accounting rate of return on the original investment
Accounting rate of return on average investment
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XYZ Company contemplates the replacement of old machinery. The annual cost of operating the old machinery...
XYZ Company contemplates the replacement of old machinery. The annual cost of operating the old machinery is P138,600, excluding depreciation, while the estimate for the new machinery is P91,300. The cost of the new machinery is P160,000, net of the trade-in allowance, with an estimated useful life of 8 years, no residual value. The effective income tax rate of 40% and the cost of capital is 8%. The old machinery has an annual deprecation of P15,000 while the new machinery...
Machine Replacement Decision Creekside Products Inc. is considering replacing an old piece of machinery, which cost $2,495,000 and has $1,463,000 of accumulated depreciation to date, with a new machine that costs $1,876,000. The old machine could be sold for $296,000. The annual variable production costs associated with the old machine are estimated to be $681,000 for eight years. The annual variable production costs for the new machine are estimated to be $463,100 for eight years. a. Determine the total and...
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The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery. This machinery has zero book value but its current market value is $830. One possible alternative is to invest in new machinery, which has a cost of $39,300. This new machinery would produce estimated annual operating cash savings of $12,650. The estimated useful life of the new machinery is four years. The DOT uses straight-line depreciation. The new machinery has an estimated salvage value...
The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery. This machinery has zero book value but its current market value is $840. One possible alternative is to invest in new machinery, which has a cost of $39,400. This new machinery would produce estimated annual operating cash savings of $12,700. The estimated useful life of the new machinery is four years. The DOT uses straight-line depreciation. The new machinery has an estimated salvage value...
The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery. This machinery has zero book value but its current market value is $830. One possible alternative is to invest in new machinery, which has a cost of $39,300. This new machinery would produce estimated annual operating cash savings of $12,650. The estimated useful life of the new machinery is four years. The DOT uses straight-line depreciation. The new machinery has an estimated salvage value...
The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery. This machinery has zero book value but its current market value is $930. One possible alternative is to invest in new machinery, which has a cost of $40,300. This new machinery would produce estimated annual operating cash savings of $13,150. The estimated useful life of the new machinery is four years. The DOT uses straight-line depreciation. The new machinery has an estimated salvage value...
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